Credit Card Debt Threatens Black Middle Class

By Jazelle Hunt NNPA Correspondent |
12/20/2013, 6 a.m.

WASHINGTON (NNPA) – Still reeling from the Great Recession, middle class blacks are maintaining their status by using credit to help cover their basic living expenses, according to a report from the NAACP and public policy research organization, Demos.

In the Recession’s aftermath, 79 percent of middle class African American households carry credit card debt. And although they have less debt than before the Recession, the credit crunch continues as black households spend an average $368 on credit to make ends meet.

“The report highlights the need to look at how much credit is serving middle class Americans and how much it’s giving a false illusion,” says Dedrick Asante-Muhammad, senior director of the NAACP Economic Department and co-author of the study. “Everybody needs credit but it should be a tool to help your economic life. Now we see it as a drain on African Americans trying to gain a middle class life.”

Released earlier this month, the report, “The Challenge of Credit Card Debt for the African American Middle Class,” is an outgrowth of a larger national study on middle class credit card debt since 2010. It found that although African Americans owe less than they did in 2008, 42 percent of households are relying on their cards for basic living expenses when their incomes and savings fall short, a trend that persists across the entire middle class. Black families are also building their futures on credit, using cards to support higher education, entrepreneurship, and medical expenses.

“Use of credit in long term investments for the future is a specific African American problem, largely because of the historical impact of racism in wealth building, and current racial bias in lending,” says Demos policy analyst, Catherine Ruethschlin, who co-authored the study. “Hypothetically, if [an African American] family was in America during the ‘60s but excluded from the same wealth-building that White families had, [they] don’t have the same financial assets to fall back on.”

The seeds for economic dispartities seen today have been sown over 50 years of redlining, blockbusting, and predatory lending. Today Black Americans have $1 in assets for every $20 owned by White Americans, and, according to the study, more than half of it is tied to homeownership.

Enter the Great Recession, when the housing bubble inflated by predatory lending practices bursts, dragging the global economy and hope for long-term black wealth down with it. Only 55 percent of the study’s black respondents own their home, compared to the 72 percent of white respondents.

If homeownership has been considered the cornerstone of the American Dream, then education has been considered the bulldozer that clears the way. According to the report, 80 percent of black college grads took out some amount of loans in order to attain a higher education, compared to 65 percent of whites.

Credit debt as a result of student loans can then affect career outcomes, as credit checks are sometimes part of the hiring process. Those with poor credit are often relegated to low-paying jobs due to this dubious but legal practice.